Hong Kong: GDP expands for the first time since Q2 2019 in the first quarter of the year
GDP grew 7.8% year-on-year in the first quarter of the year, after falling 2.8% in the fourth quarter of 2020. Q1’s reading marked the best result since Q1 2010.
The first quarter’s upturn reflected improvements in private consumption, fixed investment and exports. Household spending increased 1.6% in Q1, which contrasted Q4’s 6.9% contraction. Meanwhile, fixed investment growth accelerated to 4.5% from 3.6% in the previous quarter. Public consumption, meanwhile, grew at a slightly faster pace of 6.7% in Q1 (Q4 2020: +6.1% yoy).
Turning to the external sector, exports of services slid at a slower pace of 8.7% year-on-year in Q1 (Q4 2020: -28.8% yoy). In addition, imports of services dropped at a softer rate of 14.9% in the quarter (Q4 2020: -33.9% yoy).
On a seasonally-adjusted quarter-on-quarter basis, economic growth jumped to 5.3% in Q1 from 0.5% in the prior quarter.
Commenting on the short-term economic outlook, Lisheng Wang, Jing Wang and Ting Lu, economists at Nomura, noted:
“Considering the largely stable Covid-19 situation domestically, the government’s increasing push for vaccinations, further relaxation of social distancing restrictions (including “vaccine bubble” and “travel bubble”), a more synchronized global recovery led by the U.S. and China, and a still-supportive fiscal policy stance, we expect Hong Kong’s sequential growth to remain solid in coming months. That said, the sequential pace of recovery could remain well below the Q1 level. We believe the domestic recovery will remain gradual and bumpy, and subject to still high uncertainties from Covid-19 and U.S.-China relations.”